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Punj Lloyd------------------------------------------------------------------ Maintain UNDERPERFORM
3Q PAT below estimates; Fundamentals continue to remain weak
● It was another weak quarter– we were again estimating a profit in
this quarter but Punj Lloyd reported a loss of Rs621 mn. These
losses were operational in nature, suggesting that core margins of
orders in backlog are low and hence street targets of 10%
EBITDA margins could be at risk.
● Execution period extended sharply and, given slower execution
pace in a third of the order book (stemming from Libya) revenue
disappointments are likely ahead. Given extremely low profitability
levels, sensitivity of PAT to change in EBITDA margins is high.
● Gross debt levels remain at Rs45 bn (cash is Rs12 bn now) and
given rising interest rates, it is likely that interest outflow in FY12
could be higher than in the current year (avg. cost of 8% in FY11).
● Our EPS estimates for FY12-13 are significantly below street
numbers. We further revise down EPS for FY11 by 84%. We
maintain our UNDERPERFORM rating with target price of
Rs69.90.
Order book not representative of revenue growth trajectory
Punj Lloyd’s order book of Rs280 bn was up 19% YoY. However,
revenue growth over the past 9M has declined 35% YoY, largely due
to non-moving orders in Libya. Management highlighted that the five
orders booked under PLL have started getting executed. There was
though no timeline given for execution of the US$1.2 bn orders
booked under Sembawang.
Auditors have qualified Rs2.4 bn for non-provisioning in the ONGC
project and Rs655 mn for LDs. Ensus project is currently going
through a warranty period and hence Ensus continues to retain £7.7
mn of retention money and £2.2 mn of guarantees. In the SABIC
project, £18 mn of claims by various subcontractors are still under
dispute. Management expects favourable awards in some of these.
On the bid for stake in telecom company, Bharti Hexacomm,
management highlighted that this was largely meant for short-term
gains and as such there was no clarity on the status of bid.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Punj Lloyd------------------------------------------------------------------ Maintain UNDERPERFORM
3Q PAT below estimates; Fundamentals continue to remain weak
● It was another weak quarter– we were again estimating a profit in
this quarter but Punj Lloyd reported a loss of Rs621 mn. These
losses were operational in nature, suggesting that core margins of
orders in backlog are low and hence street targets of 10%
EBITDA margins could be at risk.
● Execution period extended sharply and, given slower execution
pace in a third of the order book (stemming from Libya) revenue
disappointments are likely ahead. Given extremely low profitability
levels, sensitivity of PAT to change in EBITDA margins is high.
● Gross debt levels remain at Rs45 bn (cash is Rs12 bn now) and
given rising interest rates, it is likely that interest outflow in FY12
could be higher than in the current year (avg. cost of 8% in FY11).
● Our EPS estimates for FY12-13 are significantly below street
numbers. We further revise down EPS for FY11 by 84%. We
maintain our UNDERPERFORM rating with target price of
Rs69.90.
Order book not representative of revenue growth trajectory
Punj Lloyd’s order book of Rs280 bn was up 19% YoY. However,
revenue growth over the past 9M has declined 35% YoY, largely due
to non-moving orders in Libya. Management highlighted that the five
orders booked under PLL have started getting executed. There was
though no timeline given for execution of the US$1.2 bn orders
booked under Sembawang.
Auditors have qualified Rs2.4 bn for non-provisioning in the ONGC
project and Rs655 mn for LDs. Ensus project is currently going
through a warranty period and hence Ensus continues to retain £7.7
mn of retention money and £2.2 mn of guarantees. In the SABIC
project, £18 mn of claims by various subcontractors are still under
dispute. Management expects favourable awards in some of these.
On the bid for stake in telecom company, Bharti Hexacomm,
management highlighted that this was largely meant for short-term
gains and as such there was no clarity on the status of bid.
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